@dharr Lovely. Thanks!

@Carl Love 

Sorry, Carl.

My fault. It's 0.5=1/2, half a year. Missed the dot. 

And yes, $12.50 is the dollar value of the stock in the up-node, S_u. Just for completeness, 0.07 is the continuously compounded risk-free rate, and the 0.52 is the probability of up-move. The other part of the expected value is zero.